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TEXT-Fitch cuts Gallantt Ispat to 'Fitch D(ind)'
March 20, 2012 / 3:47 PM / 6 years ago

TEXT-Fitch cuts Gallantt Ispat to 'Fitch D(ind)'

March 20 - Fitch Ratings has downgraded India-based Gallantt Ispat Ltd's
 (GIL) National Long-Term rating to 'Fitch D(ind)' from 'Fitch
B+(ind)'. A list of additional rating actions is provided at the end of this
commentary	
	
The downgrade reflects GIL's delays in servicing its debt obligations from July
2011 to December 2011, due to its high working capital requirements and delays
in disbursement of subsidy dues from the Government of Uttar Pradesh (GoUP). As
per the company, around INR1,250m of subsidy is due from GoUP, in accordance
with the Heavy Industrial Investment Promotion Policy. GoUP suspended the
subsidy scheme in November 2011, which has been challenged by the company in the
High Court. The company expects the subsidy issue to be resolved during Q1FY13
(financial year ending March).	
	
Fitch notes that GIL's founders infused INR400m into the company in December
2012 by way of zero-coupon fully convertible unsecured debentures to improve its
liquidity position. The company's operations remain stable with revenue of
INR1,863.2m in 9MFY12 and an EBITDA of INR130.8m.	
	
A consistent demonstration of timely debt servicing for at least two quarters
would lead to a positive rating action. Fitch expects an improvement in the
company's liquidity position after disbursement of subsidy by GoUP.	
	
GIL is a part of Gallant Group. It owns a fully integrated steel plant with a
99,000 metric tonnes per annum captive sponge iron plant and an 18 MW power
plant. In FY11, the company reported revenues of INR2,272.8m (FY10:
INR1,224.5m), a negative EBITDA of INR2.8m (FY10: INR29.2m), and a negative
EBITDA margin of 0.12% (FY10: 2.4%). However, it earned a net profit of INR31.6m
(FY10: a net loss of INR45m) due to other income of INR173.4m from the sale of
land and a profit of INR32.2m on the sale of investments. Its overall debt
increased in FY11 to INR1,442.8m (FY10: INR851.8m).	
	
Fitch has also downgraded GIL's following bank facilities:	
	
- INR1, 1176.2m term loans outstanding: downgraded to 'Fitch D(ind)' from 'Fitch
B+(ind)';	
- INR 480m fund based working capital limit: assigned 'Fitch D(ind)'; and	
- INR 66.2m (enhanced from INR20m) non fund based limits: downgraded to 'Fitch
D(ind)' from 'Fitch A4(ind)'.	
	
	
Note to editors: Fitch's National ratings provide a relative measure of
creditworthiness for rated entities in countries with relatively low
international sovereign ratings and where there is demand for such ratings. The
best risk within a country is rated 'AAA' and other credits are rated only
relative to this risk. National ratings are designed for use mainly by local
investors in local markets and are signified by the addition of an identifier
for the country concerned, such as 'Fitch AAA(ind)' for National ratings in
India. Specific letter grades are not therefore internationally comparable.	
	
Additional information is available at www.fitchratings.com. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.	
	
Applicable criteria, 'Corporate Rating Methodology', dated 12 August 2011, are
available on www.fitchratings.com.	
	
Applicable Criteria and Related Research:	
Corporate Rating Methodology

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